GST Update on Legal Professionals should not be arrested without corroborative evidence of their involvement 122/2020-21

It is often observed that the powers of arrest are exercised without examining the gravity of offence and there have been many decisions rendered by High Courts that the power of arrest should be resorted to only in exceptional circumstances. In the present update, we wish to discuss the case of AKHIL KRISHAN MAGGU VS DEPUTY DIRECTOR, DGGSTI (PUNJAB & HARYANA HIGH COURT) CWP No. 24195 of 2019 (O&M) dated 15.11.2019, wherein the Hon’ble P & H High Court pronounced that power of arrest should not be exercised at whims and caprices of any officer or for sake of recovery or terrorizing any businessman or create an atmosphere of fear, whereas it should be exercised in exceptional circumstances during the investigation.

The petitioners, being advocates of the main exporters who availed huge refund of IGST, were arrested on the suspicion that they are involved with their fraudulent client in alleged illegal refund of ITC. The Petitioner is a practicing lawyer in the field of taxation. As per respondent, four exporters had availed huge amount of refund of IGST and they are dummy owners. Eventually, during investigation, the exporters claimed that the petitioners are involved with them in this fraud. However, the petitioners pleaded that they are neither proprietor nor partner nor shareholder of any Exporter Concern/Firm/Company, who availed refund of IGST. There is no evidence of transfer of funds in the accounts of Petitioners or withdrawal of cash by any one of them. Consequently, arresting the petitioner is not justifiable.

The Court after taking into consideration the facts and submissions produced concluded that persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty. This was backed by various judicial pronouncements rendered by various High Courts.
Arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud, merely on basis of statement without any corroborative evidence linking professional with an alleged offense should be avoided. Arrest deprives any person from his right of liberty enshrined under Article 21 of the Constitution. Provisions of CrPC [Section 41 and 41A] would be applicable.

This judgement has limited the power of arresting any CA/s, advocates in absence of documentary or full proof evidence. With the rise of unemployment and shattered economy, the cases of fraud are at its peak and innocent professionals connected with these parties gets entangled in judicial proceedings without any involvement. The GST department in many instances have been arresting CAs/Advocates without proper application of law but the courts are interfering and quashing such orders. This pronouncement can definitely be used as a weapon to save legal professionals from undue harassment by department.
This is solely for educational purpose.
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GST Update on Legal Professionals should not be arrested without corroborative evidence of their involvement 122/2020-21

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